Unclear D.C. Cannabis Laws Create Underground Entrepreneurialism

Tracy Jerome Chisley

Many who have been following the growing cannabis industry were aware that our nation’s capital passed Initiative 71 in 2014. This was a referendum allowing D.C. residents to legally possess up to two ounces of cannabis for recreational use. The measure was looked upon with favor. Much due to this being a community where drug convictions have ravished the lives of many minorities in the area. Despite hard work from cannabis advocates, one major issue still exists in how to properly regulate and tax cannabis. Attempts have been shot down by Congress, which controls the funding for the city of Washington D.C., even though the District of Columbia has its own government.

This lack of regulation for distribution and tax collection has created a gray area in terms of “gifting,” a procedure that many cannabis entrepreneurs in D.C. have implemented as a creative workaround. Gifting works like this. A customer is charged for an unsuspecting item, a baseball card for instance, while, in exchange, receiving cannabis as a “gift.” In other words, the gifter is not directly selling the cannabis, and the giftee is not technically buying or receiving it. Right? Wrong. This scenario is called illegal drug trafficking according to D.C. Police. However, the unclear legalities around gifting are being put to the test.

In January of this year, XO Lounge in downtown D.C. hosted one of what had come to be known as a series of “pop-up” cannabis market events. During the event patrons paid a cover charge at the door and were greeted with samples of cannabis infused treats, including popcorn, brownies, cookies, and more. Other areas of the event had smokable flower, wax, oils and other cannabis products available in exchange for a suitable “donation.” The night after the event took place, D.C. police and alcoholic beverage regulators arrested 21 of the vendors & closed XO Lounge charging them with misdemeanor drug possession with the intent to distribute. Weeks later however, D.C. prosecutors dropped all charges on the defendants and XO Lounge, which raises the question of how similar cases will be handled in the future.

Initially, D.C. police and ABRA (Alcoholic Beverage Regulation Administration) tolerated the “pop-up” markets without interfering. But as the events became more frequent and in more locations across the District, complaints from neighbors and tipsters forced authorities to get involved. Morgan Fox of the Marijuana Policy Project stated that most of the operators want to be legal and licensed. Most of the patrons also want to do their part in supporting events that are licensed and legal. Fox and many others, feel that clarifying cannabis laws in the District would eliminate the “gray market” that currently exists. This would then be like any other licensed business, enabling the city to collect taxes as applicable.

The D.C. Cannabis Association and the DCMJ (proposers of Initiative 71) said that they will host an event in front of the District’s City Hall to make a point. The point being that a regulated system would alleviate the current “pop-up” events and bring in a regulated tax income. This will be a clear win for the city’s economy as well as a step forward for D.C.’s cannabis industry.